It is August 1st, 2022. For some reason, you want to price a US Treasury bond Ultra
Question:
It is August 1st, 2022. For some reason, you want to price a US Treasury bond "Ultra T-bond" futures contract. The Ultra T-bond futures you are considering matures on September 30th, 2022. Your best Junior Analyst Katie let you know that the 'cheapest-to-deliver' bond is a 10-year US treasury with an 8% annual coupon, paid semi-annually, which has coupon payments every Apr 30th and Oct 31st. There have been 91 days since the bond's last coupon payment and are 182 days in the current coupon period. Thus, there are also 91 days until the bond's next coupon (on Halloween). There are 61 days from now until maturity of the Ultra T-bond (until Sept 30th). The current quoted price of the bond is $107. Assume the term structure is flat, with 10% annual continuous compounding. The bond's conversion factor is 1.15. What is the actual fair futures price of the Ultra T-bond, after adjusting for accrued interest, and applying the bond's conversion factor?
Group of answer choices
$91.05
$93.47
$99.01
$110.83
Managerial Economics A Problem Solving Approach
ISBN: 978-1133951483
3rd edition
Authors: Luke M. Froeb, Brian T. McCann, Mikhael Shor, Michael R. War